I live in Los Angeles and I'm lucky enough to write about the thing I love most: movies. I'm a graduate of Vassar College and Northwestern University and for 15 years I worked at Forbes mostly covering the entertainment industry. Although I've moved into the world of corporate journalism, I still contribute blog posts here.

Moving Beyond Kickstarter: A New Website Lets People Actually Invest In Movies

Last weekend, the Veronica Mars movie opened in 291 theaters and earned $2 million. That’s pocket change for most big studios but it marked an important even in the history of film finance: the first crowd-source film to hit theaters. But if the $6 million film ends up turning a profit (likely from home video sales) the 91,585 people who backed the film on Kickstarter won’t see any kind of financial return.

Not that they’ll mind. As Jon Nathanson points out on Slate, the people who backed Veronica Mars are hardcore fans who put up money to show their support for the film, not to make a buck. Even if they wanted to until recently, there wasn’t any easy way for average investors to put their money into films in the hopes of seeing a return.

That’s slowly changing with start ups like the latest: Junction Investments. Started by Adam Kaufman, a former Goldman Sachs investment banker, and Brian Goldsmith, a former TV news producer, Junction Investments is a platform where accredited investors can buy stakes in movies from professional film financiers.

The idea is that independent film finance companies, like Endgame (Looper), Silver Reel (Getaway) and QED (Elysium) will syndicate their investments in certain films allowing outside investors to buy into the film. Investors will get the same terms that the finance companies secured so, for example, if Endgame’s deal was to take home 5% of the film’s net profit, the syndicate investors would get the same deal (albeit on smaller dollar figures).

“Investors are investing alongside professional financiers,” says Kaufman. “If it’s a debt investment they get a portion of that. If it’s an equity investment they get a portion of that.”

The idea is to give smaller investors the opportunity to make smart investments in movies. These are films that are already financed and will get made no matter what. And they are buying positions from professional film finance companies that have already decided the film is a good risk.

This kind of platform is only possible because of a provision in the JOBS Act that allows people to advertise private investments (to accredited investors who earn more than $200,000 per year or have a net worth of more than $1 million excluding their home). Junction has attracted some big name backers including Steve Wynn, producer Jason Blum and Path CEO Dave Morin.

The first move on Junction’s docket is A Hologram For The King. Based on a book by Dave Eggers, the film stars Tom Hanks and is being directed by Tom Tykwer. The movie has already started filming in Morocco.

On its face, that might seem like a really appealing investment. But buyer beware. Hanks’ last collaboration with Tykwer was Cloud Atlas. Tykwer co-directed the movie with the Wachowski siblings and it was a bust. The $100 million film earned just $130 million at the global box office. Films have to earn at least double their production budget to even begin to think about making a profit. It’s unlikely any of the investors the Wachowskis cobbled together for the film ever saw a return on investment.

Will Junction’s investors do better? Their first films have much lower budgets which means the barrier to profit is lower and they’re already backed by established Hollywood players. But those financiers have slate investments. Endgame doesn’t invest in only one movie at a time so for every group of flops there is a hit to make up the difference. That’s a luxury most of Junction’s investors probably won’t have.

Kaufman and Goldsmith have faith in their model. They’ll take their cut from investors’ profits instead of charging fees. In other words, they feel very sure those profits will materialize.

But one would assume the investors will all be grownups who go into the film game with eyes wide open. Hollywood has a sexy appeal and backers like Steve Wynn know that everyone loves to gamble.

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